Andrew Coyne: RBC outsourcing controversy an economic fraud

RBC outsourcing controversy just an economic fraud

Reacting to the media firestorm over a Royal Bank subcontractor’s use of temporary foreign workers, Immigration minister Jason Kenney was unequivocal. “The rules are very clear,” he said. “You cannot displace Canadians to hire people from abroad.”

Royal Bank of Canada has landed in the middle of a public relations fiasco following reports over the weekend that it is in the process of contracting out jobs of Canadian staffers to lower paid foreign workers.

In this case we’re talking about just 45 positions at RBC Investor Services in Toronto that according to the CBC will be transferred abroad through a deal with iGate Corp., a leading global provider of outsourcing services with significant operations in India.

But it’s not simply the fact that jobs are being lost that’s causing the ruckus — after all, outsourcing is a trend that’s has been going on for years — but rather the way it’s happening.

Yes, indeed. In fact, they’re even clearer than that. You can hire people from abroad, even at the cost of Canadian jobs, as long as they stay abroad: it’s called outsourcing, and it’s a broadly accepted practice. You can also hire people from abroad, if they move here to live. That’s called immigration, and is also broadly accepted. If, on the other hand, you hire people who fall between the two — who work here but live abroad — then it’s a scandal. What could be clearer?

But of course, this isn’t really about the rules, or Royal Bank, or even temporary foreign workers. The bank itself, as it has been at pains to point out, didn’t hire any of the prohibited aliens: iGate, the Indian company to which it outsources much of its back-office work, did. Notwithstanding Kenney’s efforts to pile on, it’s not clear iGate broke any rules: as it later emerged, it proceeded with the government’s approval in the form of a favourable Labour Market Opinion — rightly so, it would seem, since iGate wasn’t laying anybody off.

For that matter, it’s not even clear RBC is: the bank insists it is trying to find other jobs for the 45 employees to be replaced. Of the 21 workers iGate has on the job, meanwhile, only one is here on a temporary foreign worker visa — though, confusingly, 13 others are company employees here on other types of visas. But whatever else is unclear about these temporary foreign workers, what is clear is that they are here to do temporary foreign work: preparing for the transfer of IT operations from RBC’s Investor Services subsidiary to iGate’s facilities in India.

That, surely is the point. If there is a loss of Canadian jobs here, it lies in the permanent shift of work to India, not the six months of transitional arrangements that precede it — which would logically be carried out by the recipient operation in any event. If you’re upset about the use of temporary foreign workers, you should be at least as upset about outsourcing. Which, one suspects, is in fact what this is about.

But then, if you’re upset about outsourcing, you should really be just as opposed to imports generally. Whether a company pays a foreign supplier for services, or sources its parts abroad, or buys consumer goods for resale here, it’s all work that could have been, and often is, performed by Canadians. You’re outraged that temporary foreign workers are putting Canadians out of jobs? So are permanently foreign workers.

But it isn’t only foreign workers putting Canadians out of jobs. So are other Canadian workers. Every time one company loses market share to another, jobs are lost — if not by layoffs at the declining firm, then by the labour-saving measures of its more successful competitors. All firms in competitive markets try to hire as few, and pay as little, as they possibly can; the fiercer the competition, the more ruthless they will be about it. That’s true whether the competition comes from across the ocean, or across the road.

They do so, what is more, with your encouragement. Every time you shop around for a bargain, you contribute to that relentless search for efficiency, and the consequent loss of jobs. Yet even if you chose not to — or were prevented, as by tariffs, from doing so — that still wouldn’t stop jobs from being lost. Pay higher prices, willingly or unwillingly, for one thing, and you are left with that much less to spend on others: the jobs saved in one area are jobs destroyed in another.

It would not save jobs, then, if companies were forbidden to lay people off. All it would do is make everyone poorer — as well as discouraging companies from hiring people in the first place. By contrast, what has been the effect of all this rampant downsizing, outsourcing and contracting out? Hundreds of thousands of people are laid off every year in Canada. Yet the proportion of the working age population in employment, just before the recession, was at its highest level ever. So were real wages.

The temporary foreign workers controversy, in other words, is mostly a fraud. It harnesses crude xenophobia (don’t foreign workers have rights, too?) in the service of opposition to outsourcing generally, itself merely a specific expression of a broader protectionism. In every case, the underlying supposition is the same: that some jobs can be saved by preventing others from being created; that jobs can long be preserved because of government fiat, rather than because it is in employers’ interest to hire; that jobs, indeed, are a form of property, and not a contract between two willing parties. We may wish they were, but they are not.

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